Sincerely yours, Matthew J. Smith. Dear Insurance Professional: CINCINNATI COLUMBUS DETROIT. Fax: (513) Fax: (614)

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1 Dear Insurance Professional: I am an attorney who never took Latin. However, our law firm s theme and my message to you this year is rooted in the Latin term ad valorem which simply means value added. We understand the changing business climate and the economy in the insurance industry. Since our founding in 1989, our goal has been to partner with each of our clients and bring high quality legal insight and representation to insurance law matters. Throughout that process, we have always understood it is our duty as your legal counsel to bring value to the legal services we provide. Value may be defined in many ways, including a defense jury verdict at trial, a successful summary judgment motion, a thorough and complete insurance investigation, a clear and concise coverage analysis, the collection of subrogation funds, or recovering payments made due to medical fraud. We believe at the start of this second decade of the new millennium our firm must not only continue to add value, but must partner with you in new and innovative ways to achieve our goal. In the year ahead, you will hear of many changes which our firm plans to be at the forefront of regarding alternative fee agreements, value added billing, and shared responsibilities to hold down litigation costs while delivering the same level and quality of legal representation we have provided for more than 20 years. Right now, these are simply words on a page. We look forward to continuing to be the innovator in providing of insurance legal service and appreciate the confidence and trust you place in us with each new file assignment or consideration of adding our firm to your panel counsel programs. We renew to you our pledge to not only provide the high quality of service you have come to expect, but to do so in new and innovative ways to meet the challenges which lie ahead. Sincerely yours, Matthew J. Smith CINCINNATI COLUMBUS DETROIT FT. MITCHELL, KY 600 Vine Street Suite 2600 Cincinnati, Ohio (513) Fax: (513) E. State Street Suite 2000 Columbus, Ohio (614) Fax: (614) Orchard Hill Place Suite 600 Novi, Michigan (248) Fax: (248) Buttermilk Pike Suite 324 Ft. Mitchell, Kentucky (859) Fax: (859)

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3 TABLE OF CONTENTS I. AUTOMOBILE LIABILITY COVERAGE FOR PERMISSIVE USER UNDER POLICY ISSUED TO VEHICLE OWNER: A COMPARISON OF THE LAW IN OHIO, KENTUCKY, INDIANA AND MICHIGAN... 1 A. INTRODUCTION... 1 B. OMNIBUS CLAUSE GENERAL PRINCIPLES Scope of Permission Granted to Initial Permittee Scope of Permission to Second Permittee... 2 C. DISTINGUISHING COVERAGE UNDER THE OMNIBUS CLAUSE FROM AN ENTITLEMENT EXCLUSION... 3 D. OHIO LAW Omnibus Clause Required by Statute in Policies Certified as Proof of Financial Responsibility Case Law... 4 E. KENTUCKY LAW Statutory Law Case Law... 6 F. INDIANA LAW Statutory Law Case Law... 7 G. MICHIGAN LAW Statutory Law Case Law... 9 H. CONCLUSION II. POTENTIAL CHANGES TO OHIO LAW AFFECTING SUBROGATION RECOVERY III. FREQUENTLY CITED OHIO STATUTES A. GENERAL CONSIDERATIONS IN INSURANCE CLAIMS MANAGEMENT B. CLARIFICATION OF FACTS AND LEGAL DUTIES C. UNINSURED MOTORIST COVERAGE D. STATUTORY SUBROGATION RIGHTS E. LIABILITY AND DAMAGES CONSIDERATIONS F. INSURANCE FRAUD IV. FREQUENTLY CITED KENTUCKY STATUTES V. FREQUENTLY CITED INDIANA STATUTES A. AUTOMOBILE INSURANCE B. NEGLIGENCE, OTHER TORTS AND CONTRIBUTION C. SUBROGATION D. INSURANCE FRAUD E. MISCELLANEOUS STATUTES VI. FREQUENTLY CITED MICHIGAN STATUTES A. GENERAL CONSIDERATIONS IN INSURANCE CLAIMS MANAGEMENT B. AUTOMOBILE INSURANCE C. GENERAL LIABILITY CONSIDERATIONS D. MISCELLANEOUS STATUTES VII. STATUTES OF LIMITATIONS TABLE STATE BY STATE COMPARISON VIII. OHIO STATUTES OF LIMITATIONS IX. KENTUCKY STATUTES OF LIMITATIONS X. INDIANA STATUTES OF LIMITATIONS XI. MICHIGAN STATUTES OF LIMITATIONS i

4 XII. SIGNIFICANT OHIO COURT DECISIONS A. SUPREME COURT DECISIONS Insurance Coverage Decisions UM/UIM Decisions Employment Decisions Premises Liability Decisions Governmental Immunity Other Significant Decisions B. APPELLATE COURT DECISIONS Insurance Coverage Decisions UM/UIM Decisions Employment Decisions Premises Liability Decisions Governmental Immunity Other Significant Decisions XIII. SIGNIFICANT KENTUCKY COURT DECISIONS A. SUPREME COURT DECISIONS Insurance Coverage Decisions Damages Decisions Negligence Decisions Employment Decisions Other Significant Decisions B. FEDERAL COURT DECISIONS C. APPELLATE COURT DECISIONS Insurance Coverage Decisions Damages Decisions Negligence Decisions Employment Decisions XIV. SIGNIFICANT INDIANA COURT DECISIONS A. SUPREME COURT DECISIONS Insurance Coverage Decisions Negligence Decisions Medical Expenses Decisions B. APPELLATE COURT DECISIONS Insurance Coverage Decisions XV. SIGNIFICANT MICHIGAN COURT DECISIONS A. SUPREME COURT DECISIONS B. APPELLATE COURT DECISIONS Insurance Coverage Decisions Premises Liability Decisions Procedure Decisions Negligence Decisions XVI. SIGNIFICANT CASES PENDING BEFORE THE OHIO SUPREME COURT XVII. SIGNIFICANT CASES PENDING BEFORE THE KENTUCKY SUPREME COURT XVIII. SIGNIFICANT CASES PENDING BEFORE THE INDIANA SUPREME COURT XIX. SIGNIFICANT CASES PENDING BEFORE THE MICHIGAN SUPREME COURT ii

5 I. AUTOMOBILE LIABILITY COVERAGE FOR PERMISSIVE USER UNDER POLICY ISSUED TO VEHICLE OWNER: A COMPARISON OF THE LAW IN OHIO, KENTUCKY, INDIANA AND MICHIGAN A. Introduction Insurance coverage issues involving permissive users of vehicles arise in many types of situations. Suppose an employer allows an employee to drive the company vehicle to and from work, but prohibits the employee from using the company vehicle for personal use. The employee then has an accident for which he is liable while driving the company vehicle for his personal use. As another example, consider the mother who allows her teenage son to drive her car, but says nothing to her son as to whether he may allow a friend of his to drive the car. The son then allows a friend to drive the car, and the friend is responsible for causing an accident and resulting injury. Are the drivers in these two situations covered under the respective auto liability policies issued to the employer and the mother? The answer is whether coverage is provided to permissive users under the policies issued to the vehicle owners in these two situations may vary from state to state. This article addresses the insurance coverage issues arising from various permissive user situations based upon the applicable laws of Ohio, Kentucky, Indiana and Michigan. The initial discussion concerns the typical grant of coverage to permissive users (under what is known as the omnibus clause), and explains general principles which have developed as to the scope of coverage afforded under the omnibus clause. The article then explores the similarities and differences in the applicable statutory and case law of these four states. B. Omnibus Clause General Principles The person to whom the policyholder (named insured) gives permission to use the policyholder s vehicle is referred to as the permittee. As used in this article, unless otherwise qualified, permittee will refer to the initial person to whom the policyholder grants permission to use the vehicle. Where the initial permittee allows another person to use the vehicle, this person is referred to as the second permittee. 1. Scope of Permission Granted to Initial Permittee The liability coverage section of an automobile policy typically identifies persons qualifying as an insured in several ways. The policyholder is identified by name in the policy declarations. An omnibus clause is a way of designating insured persons by relationship. An omnibus clause in an auto liability policy commonly states a person driving the insured vehicle with the permission of the named insured is also an insured. E. Fischer & P. Swisher, Principles of Insurance Law 5.02[C]. Omnibus clauses may differ from policy to policy. Sometimes the unmodified word permission is used. Another form of the omnibus clause grants coverage to the driver who has the permission, express or implied, of the policyholder. Questions often arise as to the scope of permission implied by the relevant circumstances, such as the driver s previous usage of the vehicle, the location of the keys, and other facts bearing upon the implied scope of permission. 1

6 In general, three judicial interpretations have emerged as to whether a driver has express or implied permission to use the named insured s vehicle under the omnibus clause. Id The first interpretation, referred to as the strict construction view, is the use of the vehicle by the permittee must be clearly within the scope of the named insured s permission. Under this rule, if a father gives his son permission to use the father s car to drive to and from work, consent of the father would not be implied for the son to take a pleasure trip. Id. The liberal interpretation of the omnibus clause finds coverage for almost any use of the vehicle, as long as the named insured gave initial permission to the permittee to drive the vehicle. Id. The third interpretation is known as the minor deviation rule. Under this rule, a minor deviation from the initial scope of permission would still be covered under the vehicle owner s insurance policy, but a material deviation from the initial scope of permission would result in no coverage being afforded under the omnibus clause. Id. Many states have adopted statutes addressing permissive users under motor vehicle omnibus statutes. Id. Ohio, Indiana, and Michigan have such statutes. 2. Scope of Permission to Second Permittee Four theories have emerged to determine liability coverage where the initial permittee has granted permission to another person (the permittee s permittee) to drive the policyholder s vehicle. Id a. The strict view is that the named insured s grant of original permission to the first permittee does not include the authority to delegate permission to another permittee. Id. b. If the named insured expressly delegates upon a permittee the right to grant permission to any other person to drive the vehicle, some courts have held this express consent would extend coverage under the omnibus clause to the second permittee. Id. c. Many courts apply a middle ground view of implied authority. Under this view, where the first permittee allows another person to drive the vehicle, a factual determination must be made as to whether the policyholder s initial grant of permission was broad enough to include implied permission to the first permittee to allow another person to use the vehicle. Id. d. Under the liberal view, the initial grant of permission from the policyholder to the first permittee allows the permittee to delegate permission to any other driver. Id. 2

7 C. Distinguishing Coverage under the Omnibus Clause from an Entitlement Exclusion The omnibus clause has the effect of providing coverage to a person who has permission of the policyholder to drive the insured vehicle. Questions of coverage frequently focus upon the scope of permission, and the extent of permission granted from the policyholder based upon the relevant facts and circumstances. The omnibus clause should be distinguished from what is commonly referred to as an entitlement exclusion, which precludes coverage for a person who uses the insured vehicle without a reasonable belief he is entitled to do so. It is important to distinguish these provisions, because the omnibus clause focuses upon the intent of the policyholder in extending permission, whereas the focus of the entitlement exclusion is upon the driver s reasonable belief as to whether he or she was entitled to use the insured vehicle. Because the entitlement clause is an exclusionary provision, the insurer has the burden of establishing a set of facts to support the applicability of the exclusion. The focus of this article is on the omnibus clause. The cases cited herein address issues of scope of permission and coverage afforded under the omnibus clause. D. Ohio Law 1. Omnibus Clause Required by Statute in Policies Certified as Proof of Financial Responsibility The Financial Responsibility Act is contained in Chapter 4509 of the Ohio Revised Code. After an uninsured motorist causes an accident, the Act requires the person to provide proof of financial responsibility to the Bureau of Motor Vehicles or else the person s license will remain suspended. When an auto policy is certified as proof of financial responsibility, the policy must contain an omnibus clause. An owner s policy is defined in the Act as a policy certified as proof of financial responsibility. R.C (L). Such a policy must insure the policyholder and any other person using the policyholder s vehicle with the express or implied permission of the insured R.C (B). Ohio thus imposes this type of omnibus clause upon every insurance policy certified as proof of financial responsibility. A person is not an insured under an automobile insurance policy unless such person is defined as an insured by the terms of the policy, except where such policy has been certified under the provisions of Section , Revised Code, and thereby the definition of who is an insured under the policy has been modified to conform to the provisions of the statute. (Section , Revised Code.) Moyer v. Aron (1964), 175 Ohio St. 490 Syl. 2. Where a policy has not been certified as a proof of financial responsibility, an insurer need not even include an omnibus clause in its insurance policy. See Bob-Boyd Lincoln Mercury v. Hyatt (1987), 32 Ohio St. 3d 300. The omnibus provision mandated by R.C (B) 3

8 comes into play only when the policy has been certified as proof of financial responsibility. Knapp v. State Farm Mut. Auto (1982), 6 Ohio App. 3d Case Law a. Implied Permission Where an omnibus clause does not require the express permission of the named insured, but merely requires the policyholder s permission, permission may be implied by the past or present conduct of the policyholder. 58 O. Jur. 3d Insurance 905 (case citations omitted). A distinction is drawn between situations where the vehicle may be used for social or non-business purposes, as opposed to an employer/employee situation where the company vehicle is to be used for business purposes. Id. 905 (citations omitted). Permission is more readily assumed where the vehicle is used for social or non-business purposes. Id. As to the question of whether an employee has implied permission to use an employer s vehicle, to infer implied permission for a non-business use requires some express words to this effect, or conduct by the employer leading the employee to believe such permission was intended. Id The following factors are relevant in determining whether a vehicle owner has given implied consent to the driver of the vehicle in a particular situation: Previous consent of the vehicle owner. Previous use by the driver. Place where the keys to the vehicle are kept. Statements of the insured. The relationship of the parties. See Progressive Casualty Ins. Co. v. Kuhn, (No. L , 6th Dist., unreported, 41889). See also Erie Ins. Co. v. Paradise, 2009-Ohio-4005 (5th Dist. App.). Implied permission may be demonstrated by previous use or consent, place of keeping the keys in a car and the like, the relationship of the parties, a course of conduct and circumstantial evidence. Id. at 14. Even if implied permission had existed in the past, this is not dispositive of whether permission was implied at the time of the accident. The critical fact to be determined is whether permission existed at the time of the accident. Frankenmuth Mut. Ins. Co. v. Selz (1983), 6 Ohio St. 3d 169,

9 b. Scope of Permission to First Permittee Ohio adopted the minor deviation rule in Gulla v. Reynolds, (1949), 157 Ohio St The permission granted in the omnibus clause of an insurance policy relates to the use to which the vehicle is being put by the permittee at the time of the accident. See id. Coverage is not afforded under the omnibus clause when the use of the vehicle constitutes a complete departure from that for which permission was granted. Id. The Gulla decision was explained in the Frankenmuth case, supra. As to the minor deviation rule, the court stated where the use of the property deviates only slightly from the purpose from which the permission was initially granted, the standard omnibus clause in a liability insurance policy will be interpreted to extend coverage. However, if the use represents a complete departure or gross deviation from the scope of permission, no coverage will be afforded. Frankenmuth, 6 Ohio St. 3d at 171. In applying the minor deviation rule, a court must determine whether a deviation is minor or substantial on a case-by-case basis. If the person bearing the burden of proof (usually the driver or injured party) demonstrates the deviation from the intended scope of permission was only minor, coverage will be afforded. c. Issue of Permission as to Second Permittee Assuming the policyholder has given permission to a friend to drive his vehicle, the question often arises as to whether the friend (the initial permittee) may give permission to someone else (the second permittee) to drive the vehicle. Under Ohio law, the key factors in addressing this question are the intentions of the vehicle owner (the policyholder) and the particular use to which the vehicle is put at the time of the accident. Oftentimes when a person allows a friend to drive a vehicle, the vehicle owner says nothing about whether the permitted driver may allow anyone else to use the vehicle. In general, silence alone cannot be the basis for showing implied permission for the initial permittee to extend permission to another permittee. Rice v. Jodrey, (1984), 19 Ohio App. 3d 183. The situation may differ where the use of the vehicle at the time of the accident served some benefit or purpose to the first permittee, and where there is no express prohibition by the vehicle s owner for the first permittee to allow anyone else to drive the car. Where a vehicle owner had given her mother unrestricted permission to drive the car, the mother became intoxicated and asked an acquaintance to drive her home in the car. The acquaintance then caused an accident. Under these circumstances, the court held the acquaintance was insured as a permittee under the omnibus clause, because the use of the car served some purpose to the first permittee (the mother). Drake v. State Farm Ins. Co., No , 1998 WL (Ohio App. 8 Dist.). In a recent appellate decision, the court determined the second permittee was not entitled to coverage under the omnibus clause of the policy issued to the owner of the vehicle she was driving. Erie Ins. Co. v. Paradise, 2009-Ohio-4005 (5 th Dist. App.). Ms. Paradise was involved in an accident while using a truck owned by Terry Gates. Her passenger was killed in the accident. Terry s son, Danny, was Ms. Paradise s boyfriend. Terry had given permission to Danny to drive the truck with the understanding Danny would buy the truck. Terry specifically told Danny no one else could drive the truck. Danny had initially told Ms. Paradise she could drive the truck for emergency purposes only; however, when Danny began commuting to 5

10 Michigan for his work, he became aware Ms. Paradise would sometimes use the truck. Terry, the owner of the truck, later learned from other relatives Ms. Paradise was driving the truck, at which point he called his son, Danny, to remind him no one else was to drive the truck. Under these facts, the court determined Terry Gates, the vehicle owner, had not impliedly consented to Ms. Paradise s operation of the truck. The court ruled Ms. Paradise was not an insured under the terms of the auto liability policy issued to Terry Gates. E. Kentucky Law 1. Statutory Law KRS (5) is the compulsory liability insurance statute. The statute does not require a vehicle owner to insure against the negligence of a person using his vehicle without his express or implied permission. McGrew v. Stone, 998 S.W. 2d 5, 10 (Ky. 1999) (dissenting opin.) There is no Kentucky statute which mandates an omnibus clause in an automobile liability insurance policy. 2. Case Law a. Adoption of Initial Permission Rule Kentucky law pertaining to permissive users within the context of an omnibus clause changed substantially in 2008, when the Supreme Court of Kentucky adopted the initial permission rule. Mitchell v. Allstate Ins. Co., 244 S.W. 3d 59 (Ky. 2008). In explaining its decision to adopt the initial permission rule, the Court observed sometimes a driver has initial express or implied permission to operate a vehicle, but arguably exceeds the scope of permission granted. In these situations, it is necessary for courts to determine whether such a violation is egregious enough to deny coverage despite the omnibus clause. Id. at 62. Previously Kentucky had adopted the minor deviation rule. Id. at 63. The court explained the initial permission rule allows for coverage even if the use of the vehicle was not within the contemplation of the parties, or was outside any limitations placed upon the initial grant of coverage. Id. at 62. As long as the original use of the vehicle is within the permission of the named insured, any subsequent use of the vehicle by the borrower is covered under the policy. Id. The rationale of the court was based in part upon its interpretation of the requirements of Kentucky s Motor Vehicle Reparations Act (i.e., the Kentucky No-Fault Act.) In adopting the initial permission rule, the court explained, As long as permission is initially given to a person to use a vehicle, insurance coverage may extend to subsequent vehicle users through the language of the omnibus clause as long as those subsequent users have permission from the initial borrower to use the vehicle. This coverage applies even if the subsequent usage of the vehicle is not contemplated by the parties at the time the initial permission was granted. Id. at 65. The Court did limit the application of the initial permission rule. The Court stated use of the vehicle amounting to conversion is not covered through the omnibus clause unless the clause specifically allows for such coverage. Id. at 65. 6

11 b. Scope of Coverage for Second Permittee Aside from adopting the initial permission rule, the Supreme Court of Kentucky in Mitchell, supra, explained how insurance coverage through the omnibus clause may extend to subsequent users of the vehicle (as well as the initial permittee). The Court stated insurance coverage may extend to subsequent vehicle users through the omnibus clause as long as those subsequent users have permission from the initial borrower to use the vehicle. Id. at 65. This portion of the Mitchell decision expands upon the scope of coverage afforded the second permittee under the prior case law in Kentucky. Under the previous decisions in Kentucky, a second permittee was not entitled to coverage under the omnibus clause (aside from express permission by the vehicle owner) unless the operation of the insured vehicle by the second permittee benefited either the vehicle owner or the original permittee. See Seabord Fire & Marine Ins. Co. v. DeMarsh, 515 S.W. 2d 242, 243 (Ky. App. 1974). Based upon the recent Mitchell decision, in most situations it should not be difficult for a second permittee to demonstrate entitlement to coverage under the standard omnibus clause. F. Indiana Law 1. Statutory Law IC sets forth required provisions of casualty, fire and marine insurance policies. With respect to auto liability insurance, no such policy may be issued to the owner of a motor vehicle, unless there shall be contained within such policy a provision insuring such owner against liability for damages... resulting from negligence in the operation of such motor vehicle... by any person legally using or operating the same with the permission, express or implied, of such owner. The statute thus requires auto liability insurers to provide coverage to the owner of a vehicle where a person is using the vehicle with the owner s express or implied permission. 2. Case Law a. Implied Permission Where a vehicle owner (and policyholder) has allowed a person to use a vehicle on numerous occasions in the past, a court may infer the owner had granted implied permission to the person to use the vehicle at the time of the accident, even where the owner had not expressly granted permission to the permittee to do so. Permission may thus be implied from repeated prior use of a vehicle. American Family Mut. Ins. Co. v. Hall, 764 N.E. 2d 780, (Ind. App. 2002). Permissive use cannot be implied where the vehicle owner places express restrictions on the use of the vehicle, and the driver exceeds the scope of the restrictions placed on permission granted to the driver at the time of the accident. State Farm Mut. Auto Ins. Co. v. Gonterman, 637 N.E. 2d 811 (Ind. App. 1994). 7

12 b. Initial Permission Rule Indiana follows the initial permission rule ( liberal rule ) when interpreting the scope of insurance under an insurance policy omnibus clause. Gonterman, supra (citing Manor v. Statesmen Ins. Co., 612 N.E. 2d 1109, 1113 (Ind. App. 1983)). Under this rule, the permissive user s deviation from the use originally intended by the owner does not operate to terminate the initial permission granted by the owner in order to deny coverage under the omnibus clause. Gonterman, 637 N.E. 2d at 814. The Gonterman case is instructive, because the court explains how the initial permission rule may be reconciled with the idea of the vehicle owner placing specific restrictions upon the permitted driver as to the use of the vehicle. When the owner places restrictions on the use of the vehicle, violations of such use restrictions may terminate the initial permission. Id. at 814. In reconciling this idea with the initial permission rule, the court explained, when the owner of a vehicle places express restrictions on its use by others, the focus is not on whether the operator deviated from the contemplated use; the determinative question is whether the operator s use of the vehicle was restricted in the first instance. In a coverage dispute, permissive use cannot be implied when an express restriction on the scope of permission prohibits the use at issue. Id. at 814. c. Coverage Issues Concerning Second Permittee When the insured places no restrictions upon the first permittee as to the use of the vehicle, the second permittee is insured under the omnibus clause if his use of the vehicle was within the scope of permission given by the owner to the first permittee. Safe Auto Ins. v. American Fam. Mut. Ins., 890 N.E. 2d 737, 744 (Ind. App. 2008) (citing Raines v. Auto-Owners Ins. Co., 703 N.E. 2d 689, 692 (Ind. App. 1998)). In the Safe Auto case, the court drew a distinction where the first permittee is not covered under the terms of the policy issued to the owner of the vehicle. The named insured s roommate allegedly gave permission to someone else to use the vehicle, who was involved in the accident. The roommate would not have been covered under the policy because he was a resident of the policyholder s household and was not listed on the policy as an additional driver. The court concluded since the first permittee would not have been covered under the policy, this in effect breaks the chain of permission, and as a result, the second permittee cannot be covered under the omnibus clause. Id. at

13 G. Michigan Law 1. Statutory Law MCL pertains to the liability of an owner of a motor vehicle, and is sometimes referred to as the owner s liability statute. The statute provides the owner of a motor vehicle is liable for an injury caused by the negligent operation of the vehicle. However, the owner is not liable unless the motor vehicle is being driven with his or her express or implied consent or knowledge. Further, it is presumed the motor vehicle is being driven with the knowledge and consent of the owner where the vehicle is driven by an immediate member of the family. MCL (1). Whereas the above-mentioned statute applies to the liability of a vehicle owner, MCL applies specifically to insurance policies certified as proof of financial responsibility. When a policy is certified as proof of financial responsibility to a vehicle owner, the owner s liability policy is required to cover not only the named insured, but also any other person using the vehicle with the express or implied permission of such named insured... up to the minimum statutory limits of coverage (20k/40k bodily injury and 10k for property damage). MCL (b)(2). 2. Case Law MCL (1) creates a rebuttable presumption a vehicle is being driven with the knowledge and consent of the owner if the vehicle is driven by an immediate family member. Although evidence may be introduced to rebut the presumption, a court will initially presume a vehicle driven by an immediate family member of the owner of the vehicle had permission to use the vehicle at the time of the accident. Citizens Ins. Co. v. Secura Ins., 755 N.W. 2d 563, 566 (Mich. App. 2008). a. Implied Permission; Effect of Initial Permission The presumption that a motor vehicle, taken with the permission of the owner, is thereafter being driven with his express or implied consent or knowledge is not overcome by evidence that the driver has violated the terms of the original permission, nor is it overcome by evidence of good faith efforts by the owner to get the vehicle returned voluntarily by the driver. Roberts v. Posey, 194 N.W. 2d 310, 314 (Mich. 1972). Posey, a minister, was visited at his home by an acquaintance. He asked to borrow Posey s car to pick up his paycheck. Posey allowed the man to use his car, but instructed him to return the car by a specific time, as Posey had to go out on church business. When the acquaintance did not return the vehicle by the stated time, Posey called the man s wife, who did not know of her husband s whereabouts. Posey eventually notified the police his vehicle was missing. The following day the acquaintance called Posey, and said he had been involved in an accident. Citing MCL , the court held the driver had implied permissive use under the statute. Since this is a Supreme Court of Michigan decision, the case suggests a Michigan court would require significant proof to overcome the statutory presumption of implied consent where the owner of a vehicle has granted initial permission for someone to use the vehicle. Although the court does not specifically refer to the initial permission rule, the effect of the decision is very similar to the outcome expected under the initial permission rule. 9

14 The Roberts v. Posey case was cited and applied in Drielick v. Drielick, 391 N.W. 2d 435 (Mich. App. 1986). In the cited case, the permitted user operated the vehicle in violation of the original permission of the owner. The court explained there was no evidence the owner sought to revoke the permission she had given to the permittee to drive the car. The court concluded the driver still had implied permission to use the vehicle at the time of the accident, based upon the holding of Roberts v. Posey and MCL b. Scope of Permission for Second Permittee A vehicle owner allowed her son to drive her car, but had expressly forbidden her son to allow anyone else to drive the car. When the son s operator license expired, he asked a friend to drive him to work, and allowed the friend to drive his mother s car. This second permittee then caused an accident. The court held there was no implied consent for the second permittee to use the car under these circumstances. Even though the use of the vehicle was for the benefit of the first permittee (who was being driven to work by a friend), nevertheless the vehicle owner expressly prohibited her son from allowing anyone else to use her car, and on this basis the court would not extend the permission granted to the first permittee to the second permittee. Detroit Auto Inter-Ins. Exchange v. Swift, 160 N.W. 2d 738 (Mich. App. 1968). H. Conclusion This article is intended to provide an overview of the law concerning permissive use in Ohio, Kentucky, Indiana and Michigan. These cases are very fact-specific, and a jurisdiction is not always consistent in applying a given rule concerning the scope of permissive use. Nevertheless, it is hoped the article may provide a useful guide when the reader is faced with a particular claim in one of these four states involving the issue of permissive use. 10

15 II. POTENTIAL CHANGES TO OHIO LAW AFFECTING SUBROGATION RECOVERY In 2008, the president of the Ohio State Bar Association created a subrogation law subcommittee as part of the OSBA s Insurance Law Committee. This sub-committee is comprised of twelve personal injury attorneys, and one in-house, insurance-defense attorney. None of these individuals is a subrogation professional. Earlier this year, this sub-committee proposed two alternative pieces of legislation to the OSBA. The first proposal seeks to eliminate all subrogation rights in insurance contracts across all lines. The second proposal seeks to expand the make-whole doctrine to reduce subrogation recoveries for attorney fees under the common fund doctrine. If this second legislative proposal was to be adopted, subrogation will be denied unless the insured is fully compensated for his injuries and recoveries will be reduced by a proportionate share of the attorney fees incurred by the insured s counsel. After considering both proposals, the subrogation sub-committee recommended the second proposal be adopted by the OSBA. Both proposals were intended to be submitted by the subrogation sub-committee to the OSBA Council of Delegates, a group comprised of attorneys elected to represent the attorneys in the district where the delegate is located. The Council meets to consider proposed legislation and other matters affecting the OSBA. If the Council approves proposed legislation, the OSBA will use its resources to find a sponsor for the legislation and then assist in lobbying efforts to pass the legislation. However, before proposed legislation is considered by the Council, it is reviewed by other OSBA committees. The proposed legislation was presented for review to the Insurance Law Committee and several other OSBA committees. The Insurance Law Committee voted unanimously not to recommend either alternative in the proposed legislation. However, the Negligence Law Committee voted to recommend adoption of the second legislative option. This second proposal was then considered by the Screening Committee (a committee comprised of members of the Council of Delegates to consider proposed legislation before it is presented to the Council as a whole). The Screening Committee voted to recommend the Council approve the second legislative proposal alternative. At the meeting of the Council of Delegates on November 6, 2009, the Council voted to reject the proposed legislation and send it to a new committee for further study. The new committee is to present its findings at the May 2010 meeting of the Council. This means that, for the time being, the OSBA will not expend resources to support or lobby for the proposed legislation. However, new legislation could be proposed at the Council s meeting in May In addition, it is likely groups other than the OSBA are considering development of proposed subrogation legislation for consideration by the Ohio legislature. We are keenly aware of the need to protect the insurer s right of subrogation. As such, we continue to work with groups such as the National Association of Subrogation Professionals and the Ohio Association of Civil Trial Attorneys to closely monitor any proposed legislation. We intend to take all steps necessary to ensure any proposed legislation does not adversely affect the right of subrogation. 11

16 At this time, Indiana, Michigan, and Kentucky do not have in effect any legislation similar to that proposed in Ohio. None of the three states apply the make whole doctrine to subrogation recoveries. We are unaware of any pending legislation in these states. Recently, however, New York passed a bill similar to the one proposed by the OSBA subrogation subcommittee. Currently, some form of anti-subrogation legislative proposal is pending in five states. 12

17 III. FREQUENTLY CITED OHIO STATUTES A. General Considerations in Insurance Claims Management Ohio Administrative Code Unfair Claims Practices This provision is not a statute but is part of the state regulations governing insurers. It governs unfair settlement practices in the handling of property and casualty claims. Numerous minimum standards of conduct for claims representatives are set forth. It was substantially modified in November Although the code expressly provides violations of the code may result in disciplinary action being taken by the Department of Insurance, violations do not lead to civil liability, even on firstparty claims. R.C Settlement of Minor s Claims All settlements of personal injury claims of minors must be approved by the probate court of the county where the minor resides. If the net amount of the settlement proceeds to the minor exceeds $10,000.00, a guardianship must be established until the minor turns 18 or the balance of funds no longer exceeds $10, R.C Release of, or Request for, Information Relating to Fire Loss by Insurance Company Civil authorities investigating property fire losses (including the fire marshal, a fire department chief, local law enforcement, or the county prosecutor) may request an insurance company investigating a property fire loss to release any information in its possession concerning the loss. R.C Salvage Titles If it is economically impractical to repair a vehicle and the insurer has paid the owner an agreed sum for the purchase of the vehicle, the insurer shall obtain the title and within 30 days obtain a salvage title. If the owner retains possession of the vehicle, the insurer cannot pay the owner to settle the claim until the owner first obtains a salvage title. R.C (D) Motor Vehicle Insurance Policy Applications The written application of insurance is part of a motor vehicle liability policy. 13

18 B. Clarification of Facts and Legal Duties R.C Action for Discovery When information and facts surrounding a case are difficult to obtain, a person claiming to have a cause of action, or a person against whom a cause of action has been filed, may bring an action for discovery. A discovery action allows such party to explore the strengths of the complaint or defense without subjecting the party to the potential penalties associated with frivolous lawsuits. R.C et. seq. Declaratory Judgment Actions This chapter allows parties to file suit to have the court determine the validity of a contract and/or the rights of the parties under the contract. This is the most effective tool for resolving disputes on the availability or amount of insurance coverage available. Effective September 24, 1999, a plaintiff who is not an insured under a policy cannot bring a declaratory judgment action against a third party s insurer to determine if coverage is available for a claim until or unless a final judgment has been placed of record awarding the plaintiff damages against the insured. R.C (A)(1)(c) Employee Under Construction Contract The statute sets out specific factors to determine whether a person is an employee under a construction contract. C. Uninsured Motorist Coverage R.C UM/UIM Coverage (A) Effective October 31, 2001, an insurer no longer has a duty to offer UM/UIM coverage to its insured with the sale of a policy. As a result, there will no longer be any requirement that a rejection or reduction in coverage be in writing. (A) UIM coverage is not excess coverage. (G) Insurers may preclude both inter-family and intra-family stacking in their policies. (H) On wrongful death claims, any claim for a single death is subject to the per person limit on coverage. (H) An insured has a three-year statute of limitations to assert a UM/UIM claim, assuming they did not destroy the insurer s right of subrogation. (K) A vehicle available for the regular use of the insured, a family member, or a fellow household member can be deemed an uninsured vehicle. (L) These requirements only apply to policies meeting the financial responsibility requirements or to umbrella policies. 14

19 R.C Per Person Limits For both liability and UM/UIM coverages, only the per person limit is available for recovery for each person suffering a bodily injury or for each decedent. D. Statutory Subrogation Rights R.C Immunity of Political Subdivisions to Subrogation Claims Political subdivisions are immune to any subrogation claim brought by an insurer. R.C (E) UM/UIM Claims In the event of payment to an insured for an uninsured/underinsured motorist claim, the insurer making such payment is entitled to the proceeds of any settlement or judgment resulting from the exercise of the insured s rights against a legally liable party. This right is limited by relevant insolvency proceedings. R.C Subrogation If an insurance company pays to, or on behalf of, its insured any amount later determined to be due from another insurer, it shall be subrogated to all rights of the insured against such insurer. R.C Workers Compensation Subrogation Rights This statute became effective April 9, 2003, and therefore applies only to injuries occurring on or after that date. It restores subrogation rights of the Ohio Bureau of Workers Compensation and self-insured employers. For claims where the injury occurred prior to April 9, 2003, there is no right of subrogation. Employees now must notify the lienholder if there is a third-party who is responsible for their injuries so that there is a reasonable opportunity to assert their subrogation rights. Responsible parties include UM/UIM insurers. If an employee is not made whole, then the statute prescribes a formula for pro-rata distribution of any recovery between the employee and lienholder. If there is the potential for future payments by the lienholder, a portion of the recovery is to be put in an interest-bearing trust account to protect any future lien. 15

20 E. Liability and Damages Considerations R.C Immunity Recreational User Claims The statute provides where a premises owner may be immune from claims by a recreational user of the premises. R.C et. seq. Wrongful Death Actions A wrongful death action can only be brought by the executor or administrator of the decedent s estate. The decedent s surviving spouse, parents, and children are rebuttably presumed to have been damaged by the death. All other family members must prove their entitlement to damages. R.C Allocation of Damages This statute only applies to claims where the injury occurred on or after April 8, If there are multiple defendants at fault, any defendant who is more than fifty percent at fault is subject to joint and several liability for the plaintiff s economic damages. All other at-fault defendants are liable only to the proportionate extent of their liability. All at-fault defendants are only proportionally liable for non-economic damages. If there are multiple defendants at fault, and no one defendant is more than fifty percent at fault, then the at-fault defendants are liable only to the proportionate extent of their liability for both economic and non-economic damages. The only exception exists for intentional tortfeasors, who are still subject to joint and several liability for economic damages. R.C Right of Contribution This statute only applies to claims where the injury occurred on or after April 8, A right of contribution will exist only if two or more tortfeasors are subject to joint and several liability. R.C Set-offs for Damages This statute only applies to claims where the injury occurred on or after April 8, A nonsettling defendant is entitled to a set-off from any award of damages from what a plaintiff has already recovered from any settling party. This right exists even if the settling party is not found to be liable. This overrules Fildelholtz v. Peller, (1998), 81 Ohio St. 3d 197, which required a finding the settling party was liable before a set-off could be imposed. 16

21 R.C Enforcement of Contribution This statute only applies to claims where the injury occurred prior to April 8, If the injury occurred on or after that date, R.C is applicable instead. A party has one year from the date of judgment against it to seek contribution from joint tortfeasors. If the party settles a claim without a judgment, that party has one year from the date of settlement in which to seek contribution. A party who enters into a good faith settlement with a plaintiff or claimant for only a portion of the plaintiff s damages is immune to claims for contribution from other tortfeasors. The release of claims bars any contribution claims of joint tortfeasors made either before or after the date of settlement. R.C Comparative Fault in Product Liability Actions Assumption of risk is a defense in product liability claims. Depending upon the nature of the assumption of risk, it can be an absolute bar to a plaintiff s recovery, without any comparative fault analysis, or serves as a proportionate basis for reducing damages and liability. This statute took effect in April R.C Caps on Compensatory Damages There are no caps on economic damages. There are no caps on non-economic damages for catastrophic injuries, which are defined as permanent and substantial physical deformity, loss of use of a limb, or loss of a bodily organ system, or permanent physical functional injury that permanently prevents the injured person from being able to independently care for and perform life-sustaining activities. With respect to non-catastrophic injuries, non-economic damages are capped at the greater of $250, or three (3) times the amount of economic damages, with an absolute maximum of $350, per plaintiff or $500, per occurrence. Thus, if an individual plaintiff incurs more than $83, in economic loss damages, the cap for noneconomic damages increases from $250, to $350, R.C Comparative Fault A plaintiff s recovery is reduced in proportion to their percentage of comparative fault. If a plaintiff is 51% or more at fault, they are barred from recovery. For injuries occurring prior to April 8, 2003, there is joint and several liability among joint tortfeasors for economic damages. For non-economic damages there is only several liability among joint tortfeasors. If the injury occurred on or after April 8, 2003, R.C is applicable instead. 17

22 R.C Collateral Benefits A defendant in a tort action may introduce evidence of certain collateral benefits for the plaintiff, with stated exceptions. One such exception is if the source of collateral benefits has a federal, contractual or statutory right of subrogation. R.C Punitive or Exemplary Damages Effective April, 2005, a defendant now has an absolute right to bifurcate a trial on a punitive damage claim. Punitive damages are capped at one to two times the amount of any compensatory damage award. In the case of a small employer or private individual, punitive damages are capped at two times the amount of damages or ten percent of their net worth. R.C Waiver of Physician-Patient Privilege By filing a tort action, a plaintiff waives any physician-patient privilege and the defendant is entitled to obtain the entirety of the plaintiff s medical records. R.C Workplace Substantial Certainty Torts This statute took effect April 7, It reflects the latest legislative effort to codify workplace substantial certainty torts. An employee making such a claim must now either prove the employer intended to injure them or that the employer acted with the belief that injury was substantially certain to occur. Substantial certainty is considered a deliberate intent to cause injury, disease, or death. The statute goes on to provide that the deliberate removal of a safety guard or any misrepresentation of a toxic or hazardous substance creates a rebuttable presumption of an intent to injure. R.C and Parental Liability Liability of the parents is limited to $10, where their child willfully damages property or commits a theft offense (R.C ) and where their child has assaulted someone (R.C ). R.C Insurance Money Applied to Judgment Once a final judgment is entered in favor of a plaintiff against a person insured against such liability, after thirty (30) days the judgment creditor may file a supplemental complaint directly against the insurer to pay the amount of the unpaid judgment against the insured. 18

23 R.C Extent of Liability under Policy (Valued Policy Statute) The valued policy statute applies to any structure insured against loss by fire or lightning. In case of a total loss the insurer shall pay the amount of the policy; however, if the policy requires actual repair or replacement of the structure, then the amount paid shall be as prescribed by the policy. R.C Fire Loss Claim Payment of Property Taxes Where fire damage to a structure exceeds $5,000.00, the statute sets forth procedures for payment of delinquent property taxes from the insurance proceeds. R.C No Insurance for Punitive Damages Motor vehicle policies cannot insure against punitive damages. R.C Fellow Employee Tort Immunity An employee may not bring suit against an employer or fellow employee for injuries sustained as a result of the negligence of the employer or fellow employee. The injury must have occurred within the scope and course of employment and be compensable under Workers Compensation laws. The statutory immunity does not apply to intentional torts. R.C Liquor Liability Claims This statute limits the scope of claims against a tavern due to actions of an intoxicated person resulting in injury to a third party. R.C Seatbelt Defense This statute became effective April A defendant may now interject evidence the plaintiff failed to wear a seatbelt. This evidence is not admissible for the purposes of establishing liability but can be utilized to establish a plaintiff s injuries would not have occurred or not have been as severe, had a seatbelt been worn. 19

24 F. Insurance Fraud R.C (B)(1) Presenting Fraudulent Claims A person commits insurance fraud if, while acting with purpose to defraud or knowing the person is facilitating a fraud, the person presents or causes to be presented any written or oral statement that is part or in support of an application for insurance or a claim for a benefit under a policy of insurance, knowing the statement, in whole or in part, is false or deceptive. R.C (B)(2) Fraud in the Application or Claim for Insurance It is illegal to assist, aid, abet, solicit, procure, or conspire with another to prepare or make any written or oral statement intended to be presented to an insurer as part or in support of an application for insurance or a claim for a benefit under a policy of insurance, knowing the statement, in whole or in part, is false or deceptive. R.C (C) Penalties First Degree Misdemeanor Fraudulent claims in an amount less than $ Fifth Degree Felony Fraudulent claims between $ and $4, Fourth Degree Felony Fraudulent claims between $5, and $99, Third Degree Felony Fraudulent claims of $100, or more. R.C (T) and Pretext Interviews A pretext interview, as defined in R.C (T), is an interview whereby a person, in an attempt to obtain information about a natural person, performs one or more of the following: (1) Pretends to be someone else; (2) Pretends to represent another entity; (3) Misrepresents the true purpose of the interview; and/or (4) Refuses to identify himself/herself. An insurer is generally prohibited from using pretext interviews to obtain information in connection with an insurance transaction; however, a pretext interview may be undertaken to obtain information for the purpose of investigating suspected criminal activity, fraud, material misrepresentation, or a material non-disclosure in connection with an insurance claim. 20

25 R.C Disclosure of Personal or Privileged Information by an Insurance Carrier An insurer is prohibited from disclosing any personal or privileged information about an individual collected or received in connection with an insurance transaction, unless the disclosure is necessary for detecting or preventing criminal activity, fraud, material misrepresentation, or a material non-disclosure in connection with an insurance action. Disclosed information must be limited to that which is reasonably necessary to detect or prevent criminal activity, fraud, material misrepresentation, or a material non-disclosure in connection with insurance transactions. When the above conditions are met, disclosure may be made to law enforcement or other governmental agencies to protect the interest of the insurer in preventing and/or prosecuting fraudulent claims or if the insurer reasonably believes illegal activities have already been conducted by the individual. R.C False Answer in Application for Insurance An insurer is prohibited from denying recovery under a policy of insurance on the basis the applicant gave false answers in his application, unless it is proved the answer was willfully false, fraudulently made, material, and induced the company to issue the policy. The agent or insurance company must have no prior knowledge of the application s falsity or fraudulent nature prior to issuing the policy of insurance. R.C Time for Determination in Arson Investigation The Fire Marshall has 90 days after a fire loss in excess of $5, to determine whether the loss was caused by arson. R.C and Exchange of Information with Law Enforcement and Prosecuting Agencies An insurer has a legal obligation to notify law enforcement authorities when it has reason to suspect its insured has submitted a fraudulent motor vehicle claim. Failure to notify the proper authorities constitutes a fourth degree misdemeanor. R.C Insurance Fraud Warnings All application and claim forms issued by an insurer must contain the following warning: Any person who, with intent to defraud or knowing he is facilitating a fraud against an insurer, submits an application or files a claim containing a false or deceptive statement is guilty of insurance fraud. Failure to include the warning is not a valid defense for insurance fraud. 21

26 R.C Immunity for Providing or Receiving Information Relating to Suspected Fraudulent Insurance Acts No person is subject to liability for libel or slander by furnishing information to the Superintendent of Insurance relating to suspected fraudulent insurance acts. This immunity extends to any such information provided to any law enforcement official and any other person involved in the detection or prevention of fraudulent insurance acts. R.C Anti-Fraud Programs Every insurer is now required to adopt a written anti-fraud program. This program must include procedures for detecting insurance fraud. Additionally, this program is to identify the person(s) responsible for the anti-fraud program. Those not yet engaged in the business of insurance must submit a written plan within ninety (90) days after beginning to engage in the business of selling insurance. R.C Notice to Department of Insurance of Suspected Fraud Requires an insurer to notify the Ohio Department of Insurance whenever it suspects insurance fraud (as established in the Theft Fraud Law under R.C ) involving a claim of $1, or more. 22

27 IV. FREQUENTLY CITED KENTUCKY STATUTES K.R.S Limited Waiver of Sovereign Immunity in Negligence Claims It is the intent of the General Assembly to preserve the sovereign immunity of the commonwealth, except in limited situations set forth in the statute. Except as specifically indicated otherwise, the Board of Claims shall have exclusive jurisdiction to hear claims for damages against the commonwealth. K.R.S Duties of State Fire Marshal and Chief State Building Official Relating to Fire Loss Details actions the State Fire Marshal shall or may take in the event of a fire loss. K.R.S Records of Fire Inspections, Investigations and Losses State Fire Marshal shall keep a record of all fire inspections, investigations and fire losses occurring in this state and of facts concerning them. The records shall be public except for limited circumstances. K.R.S Inspection of Property by Fire Chief or Other Department Personnel - Inspection and Investigation Reports Fire department is authorized to inspect all property for the purpose of ascertaining and causing to be corrected any conditions likely to cause fire loss, or determining the cause or origin of any fire loss, or discovering any violation of a law or ordinance relating to fire prevention and protection. K.R.S Unfair Claims Practices Act This statute imposes duties on insurers on both first-party and third-party insurance claims. Under the statute, claims are to be paid within thirty (30) days upon notice and proof of claim unless the insurer is able to demonstrate why the claim cannot or should not be paid. The statute imposes interest at an annual rate of twelve percent (12%) after the expiration of the thirty (30) day period. The statute also allows an insured to recover attorneys fees for violations of this statute. 23

28 K.R.S Power of Authorized Agency to Require Insurer to Furnish Information Concerning Fire Loss An authorized agency may require an insurer to release information or evidence in the insurer s possession deemed important to the investigation of a fire loss of suspicious origin. Such information may include, but is not limited to: (1) Pertinent insurance policy information pertaining to such fire loss and any application for such a policy; (2) Policy premium payment records; (3) History of previous claims made by the insured; (4) Material relating to such loss or potential loss. Furthermore, when an insurer has reason to believe a fire loss may be of other than accidental cause, the insurer shall notify, in writing, an authorized agency. Any insurer, or person acting in its behalf, or authorized agency who in good faith releases information in compliance with this section, shall not be held civilly or criminally liable. K.R.S Uninsured Vehicle Coverage No automobile insurance policy shall be issued unless it provides coverage for injuries caused by the owners or operators of uninsured motor vehicles. An insured shall have the right to reject such coverage in writing. The term uninsured motor vehicle shall be deemed to include an insured motor vehicle where the liability insurer thereof is unable to make payment with respect to the legal liability of its insured due to insolvency. K.R.S Underinsured Motorist Coverage A tortfeasor s liability insurance is the primary coverage and the underinsured motorist coverage insurance is the secondary or excess coverage. Therefore, UIM coverage is payable only to the extent that judgment exceeds the tortfeasor s liability coverage. Kentucky Farm Bureau Mut. Ins. Co. v. Rogers, 179 S.W.3d 815, 818 (Ky. 2005). (1) Every insurer shall make available upon request to its insureds underinsured motorist coverage. (2) If an injured person agrees to settle a claim with the liability insurer and the settlement would not fully satisfy the claim for personal injuries so as to create an uninsured motorist claim, then written notice of the proposed settlement must be submitted by certified or registered mail to all underinsured motorist insurers that provide coverage. (3) The underinsured motorist insurer then has a period of 30 days to consent to the settlement or retention of subrogation rights. 24

29 (4) The underinsured motorist insurer is entitled to a credit against total damages in the amounts of the limits of the underinsured motorist liability policies in all cases. Nothing, however, including any payments or credits, reduces or affects the total amount of underinsured motorist coverage available to the injured party. K.R.S Immunity for Cooperation with Law Enforcement Under this statute an insurer is immune from civil liability if it notifies law enforcement authorities of suspected insurance fraud. K.R.S Special Investigative Units All insurers licensed in Kentucky must have a special investigative unit to investigate possible insurance fraud. The unit may be staffed either by employees of the insurer or individuals specifically contracted by the insurer to investigate. K.R.S Exclusiveness of Workers Compensation Remedy If an employer secures payments of Workers Compensation for his employees, the liability of the employer shall be limited to such Workers Compensation payments and shall be exclusive and in place of all other liability. K.R.S Parent or Guardian Liable for Willful Damage to Property Caused by Minor The parent or guardian of any minor, in his care and custody, against whom judgment has been rendered for the willful marking upon, defacing or damaging of any property, shall be liable for the payment of that judgment up to an amount not to exceed $2, and not to exceed $10, in a cumulative amount. K.R.S Assessment of Punitive Damages In any civil action where claims for punitive damages are included, the jury, or judge if the jury trial has been waived, shall determine concurrently with all the other issues presented whether punitive damages may be assessed. In determining the amount of punitive damages to be assessed, the trier of fact should consider the following factors: (1) The likelihood at the relevant time that serious harm would arise from the defendant s misconduct; (2) The degree of the defendant s awareness of that likelihood; (3) The profitability of the misconduct to the defendant; 25

30 (4) The duration of the misconduct and any concealment of it by the defendant; and (5) Actions by the defendant to remedy the misconduct once it became known to the defendant. K.R.S Collateral Source Payment Rule Collateral source payments, except life insurance, the value of any premiums paid by or on behalf of the plaintiff for same, and known subrogation rights shall be an admissible fact in any civil trial. K.R.S Obligations of Owner to Persons Using Land for Recreation An owner of land owes no duty of care to keep the premises safe for entry or use by others for recreational purposes, or to give any warning of a dangerous condition, use, structure, or activity on the premises to persons entering for such purposes. Nothing in this section limits in any way any liability which otherwise exists for willful or malicious failure to guard or warn against a dangerous condition, use, structure, or activity. K.R.S Statute of Repose (1) In any product liability action it shall be presumed that the subject product was not defective if the injury occurred more than five years after the date of sale to the first consumer or more than eight years after the date of manufacture. (2) In any product liability action it shall be presumed that the product was not defective if the design, methods of manufacture and testing conform to the generally recognized and prevailing standards or the state-of-the-art in existence at the time the design was prepared and the product was manufactured. K.R.S Presumptions in Product Liability Actions (1) In any product liability action, it shall be presumed, until rebutted by a preponderance of the evidence to the contrary, that the subject product was not defective if the injury, death or property damage occurred either more than five years after the date of sale to the first consumer or more than eight years after the date of manufacture. (2) State of the Art Defense. K.R.S Apportionment of Fault In cases involving more than one alleged wrongdoer, the jury is to consider the fault not only of the defendants remaining in the case but also of any parties who may have been dismissed or were never joined as parties. Each defendant is liable only for their proportionate share of fault. 26

31 K.R.S Actions to be Brought within Five Years The following actions shall be commenced within five years after the cause of action accrued: (1) An action upon a contract not in writing, express or implied. (2) An action for personal injuries suffered by any person against the builder of a home or other improvements. This cause of action shall be deemed to accrue at the time of original occupancy of the improvements which the builder caused to be erected. K.R.S Liquor Liability The consumption of intoxicating beverages, rather than the serving, furnishing, or sale of such beverages, is the proximate cause of any injury, including death and property damage, inflicted by an intoxicated person upon himself or another person. No person holding a permit under KRS , , , nor any agent, servant, or employee of the person, who sells or serves intoxicating beverages to a person over the age for the lawful purchase thereof, shall be liable to that person or to any other person or to the estate, successors, or survivors of either for any injury suffered off the premises including, but not limited to, wrongful death and property damage. 27

32 V. FREQUENTLY CITED INDIANA STATUTES A. Automobile Insurance I.C Financial Responsibility Requires insurance in the following amounts: (1) $25, per person; (2) $50, per accident; and (3) $10, property coverage per accident. I.C (a) UM/UIM Coverage Requires insurers to offer UM/UIM coverage with every bodily injury liability policy of insurance in an amount not less than $50, or the limit of liability insurance, whichever is greater and which can only be rejected in writing. I.C (a) Uninsured Motor Vehicles An uninsured motor vehicle is one without liability insurance or not otherwise compliant with the financial responsibility requirements of such laws of this or another state or where the insurer is unable to make payments to the limit of liability due to insolvency. I.C (b) Underinsured Motor Vehicles An underinsured motor vehicle is one where the limits of coverage available for payment to the insured under all bodily injury liability policies covering persons liable to the insured are less than the limits of the insured s underinsured motorist coverage. I.C Definitions This statute contains the definitions for automobile insurance policy, and automobile liability coverage. B. Negligence, Other Torts and Contribution I.C Civil Liability for Furnishing Alcohol A person who furnishes alcohol is not liable for civil action for damages caused by the intoxicated person, unless they actually knew the person was visibly intoxicated, and the intoxication of the person was the proximate cause of the injury or damage. If a person, who is 21, suffers an injury or death, caused by voluntary intoxication, the person, the person s heirs, dependants or representative may not make a claim against the person who furnished the alcohol. 28

33 I.C Medicaid Claim Insurer must accept a Medicaid claim for a Medicaid recipient for three years from the date of service. An insurer cannot deny a Medicaid claim solely based on the date of submission, type or format of the claim, method of submission or failure to provide proper documentation. Insurer cannot deny a Medicaid claim solely due to lack of prior authorization. Insurer will conduct the prior authorization retrospectively when prior authorization is necessary. Insurer must adjudicate such claim as if it received prior authorization. I.C Entry onto Premises of Another A person, who enters a premise, without permission or monetary compensation, for the purposes of hunting or fishing, does not have an assurance that the premise is safe. The owner of a premise does not assume responsibility or incur liability for damage or injury caused by others persons using the premises. I.C Products Liability Actions The article governs all actions that are brought by a user or consumer against a manufacturer or seller for physical harm caused by a product regardless of the substantive legal theory or theories upon which the action is brought. I.C Product Liability Liability exists for an unreasonably dangerous or defective product if the seller should reasonably foresee the consumer or class of persons being exposed to the harm caused by the defective condition, the seller is engaged in the business of selling the product and the product reaches the user or consumer without substantial alteration. I.C Product Liability An action can be maintained even though reasonable care was used in the manufacture and preparation of the product and there is no privity of contract. However, reasonable care is a defense to design defect claims and those for failure to provide adequate warnings. I.C Strict Product Liability An action for strict product liability for an unreasonably dangerous defective condition may only be brought against the manufacturer. 29

34 I.C Product Manufacturers If a court cannot gain jurisdiction over a manufacturer, then the manufacturer s principal distributor or seller over whom the court can gain jurisdiction will be deemed the manufacturer of the product. I.C Product Liability A product liability action in negligence or strict liability must be commenced within two years from the cause of action or within ten years after the delivery to the initial user or customer. If the cause of action happens after eight years but before ten years of the date of delivery, the action may be commenced within two years after the cause of action. I.C Indemnity in Product Liability Actions A party held liable may seek indemnity from other persons whose actual fault caused the product to be defective. I.C Wrongful Death Requires an action in wrongful death to be maintained by the personal representative of the decedent and to have been able to have been prosecuted by the decedent had the decedent lived. I.C (d) Limitation of Certain Wrongful Death Damages The type of damages in subsection (c)(3)(a) (reasonable medical, hospital, funeral and burial expenses) are limited to $300, I.C Parental Liability A parent is liable for no more than $5, in actual damages from damage cause by their child, if the parent has custody and the child is living with the parent. I.C Payments of Awards Proof of payments may be considered by trier of fact for determining the amount of any award and for any court review of awards considered excessive. I.C Comparative Fault of Governmental Subdivisions Contributory negligence remains a complete defense to claims under the Tort Claims Act. 30

35 I.C Comparative Fault Set-Off Contributory fault of a claimant acts to proportionately reduce the total damages for an injury by the claimant s contributory fault. I.C Contributory Negligence as Complete Defense Contributory negligence is a complete defense if a claimant s contributory fault is greater than the fault of all other persons whose fault proximately contributed to the claimant s damages. I.C Intentional Torts A plaintiff may recover one-hundred percent of the compensatory damages in a civil action for an intentional tort from a defendant who was convicted after a prosecution based on the same evidence. I.C Contribution and Indemnity In an action under this chapter, there is no right of contribution among tortfeasors. The right of indemnity is unaffected by this section. I.C Nonparty Defense In an action based on fault, a defendant may assert that the damages of the claimant were caused in full or in part by a nonparty. I.C Nonparty Defense The burden of proving a nonparty defense is upon the defendant who must affirmatively plead the defense. I.C Nonparty Defense A nonparty defense must be pled if known. Nonparty defenses which become known after the filing of the answer must be raised with reasonable promptness. If the summons and complaint were served more than one hundred fifty (150) days prior to the expiration of the claimant s statute of limitations, nonparty defenses must be pled no later than forty-five (45) days prior to the expiration of that limitation of action; however, the trial court may alter these time limits to allow defendants a reasonable opportunity to discover the existence of a nonparty defense and allow the claimant a reasonable opportunity to add the nonparty as an additional defendant prior to the expiration of the period of limitations applicable to the claim. 31

36 C. Subrogation I.C (a) Subrogation for UM/UIM Payments Provides that payment of UM/UIM coverage for damages operates to subrogate the insurer to any cause of action in tort which payee may have. I.C (b) Exception to the Right of Subrogation for UIM Payments The insurer providing underinsured motorist coverage does not have the right of subrogation if it is informed of a bona fide offer of settlement which includes a certification of the liability coverage limits of the underinsured motorist and the insurer fails to advance payment in at least the amount of the offer within thirty (30) days. I.C Lien Reduction Subrogation claims or other liens or claims arising out of the payment of medical expenses or other benefits as the result of personal injuries or death shall be diminished by the claimant s comparative fault or the uncollectibility of the full value of the claim resulting from limited liability insurance or any other cause in the same proportion as the claimant s recovery is reduced. The lien or claim shall also bear a pro rata share of the claimant s attorney fees and litigation expenses. D. Insurance Fraud I.C Release of Information by Insurer Insurer must furnish policy information relevant to fire loss, history of claims of claimant, and materials relating to fire investigation, if requested by an authorized agency investigating a fire loss. I.C Arson Reporting When an insurer has reason to believe a fire loss in which it has an interest is caused by a means that was not accidental, then the company shall notify an authorized agency in writing and provide that agency with all materials developed from the insurer s investigation of the fire loss. The insurer shall also provide the office of the state fire marshal a copy of any information provided under this section. I.C Arson Reporting When an authorized agency receives information under this chapter, it may release or provide the same information to any other authorized agency to further its investigation. In addition, an insurer who provides information under this chapter has the reciprocal right to request and receive relevant information from that agency. Finally, an insurer or authorized agency, who 32

37 releases or provides evidence or information under this chapter, is immune from any civil or criminal liability for providing the evidence or information. I.C Arson Reporting When an authorized agency is investigating a fire that it believes to have been caused by arson it may, in writing, order an insurer to withhold payment of any policy proceeds on the damaged or destroyed property for up to thirty (30) days from the date of the order. The insurer may not make a payment during that time, except as follows: (1) Emergency living expenses; (2) Emergency action necessary to secure the premises; (3) To prevent further damage to the premises; or (4) To a mortgagee who is not the target of the investigation of the authorized agency. I.C Vehicle Theft Reporting If an insurer has reason to believe that a vehicle theft claim made by an insured is fraudulent, the insurer shall notify, in writing, an authorized agency of the suspected fraudulent claim and provide the agency with all materials developed from the insurer s investigation. I.C Vehicle Theft Reporting An authorized agency investigating a vehicle theft may, in writing, require an insurer investigating the loss to release any and all relevant information or evidence considered important to the authorized agency, including: (1) Pertinent policy information (including a policy application); (2) Policy premium payment records; (3) History of prior claims made by the insured; and (4) Material relating to the investigation, including: a) Statements; b) Proofs of Loss; and/or c) Other relevant evidence. 33

38 I.C Vehicle Theft Reporting An authorized agency provided with information under this chapter may release or provide the same information to any other authorized agency to further its investigation. In addition, an insurer who provides information under this section has the reciprocal right to request and receive relevant information from that agency. When requested, the agency shall provide the requested information within a reasonable time, not exceeding thirty (30) days. Finally, an insurer or authorized agency that releases or provides evidence or other information under this chapter is immune from civil or criminal liability for providing that information. I.C Claim Forms All preprinted claim forms required by an insurer as a condition of payment of a claim must contain a statement which clearly states the following: A person who knowingly and with intent to defraud an insurer files a statement of claim containing any false, incomplete, or misleading information commits a felony. I.C Fire Investigation A fire department must investigate and determine the cause of fire in their territory. If the fire chief believes a crime was committed, he must notify the division and submit a report. The report must include: 1) a statement of facts; 2) the extent of damage; 3) the amount of insurance; and 4) other information required in the commission s rules. To carry out this section, the fire department may: 1) enter and inspect property; 2) cooperate with prosecuting attorney; 3) subpoena witnesses and documents; 4) give oaths; 5) take depositions and conduct hearings; and 6) separate witnesses and regulate the course of proceedings. E. Miscellaneous Statutes I.C Declaratory Judgment A court may declare rights, status, and other legal relations whether or not further relief is or could be claimed. I.C Declaratory Judgment A person interested under a deed, will, written contract, or other writings or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have questions of construction or validity determined or obtain a declaration of rights, status, or legal relations thereunder. 34

39 I.C Qualified Settlement Offer This is essentially a codification of the Trial Rule 68 Offer of Judgment. When a qualified settlement offer is made pursuant to this statute, and not accepted, then the party rejecting the offer must ultimately obtain a more favorable judgment. If the rejecting party fails to obtain a more favorable judgment, the offering party is entitled to attorney s fees, costs, and expenses in an amount not to exceed $1, To be valid, a qualified settlement offer must: (1) Be in writing; (2) Be signed by the offeror or the offeror s attorney; (3) Be designated on its face as a qualified settlement offer; (4) Be delivered to each recipient or the recipient s attorney by: a) Registered or certified mail; or b) Any other method that verifies the date of receipt; and (5) Set forth the complete terms of the settlement proposal in sufficient detail to allow the recipient to decide whether to accept or reject it; (6) Include the name and address of the offeror and the offeror s attorney; and (7) Expressly revoke all prior qualified settlement offers made by the offeror to the recipient. 35